Asian Social Science; Vol. 11, No. 5; 2015 ISSN 1911-2017 E-ISSN 1911-2025 Published by Canadian Center of Science and Education 26 Factors Determining Household Consumer’s Willingness to Pay for Water Consumption in Malaysia Nabsiah Abdul Wahid 1 & Chew Kah Hooi 1 1 Graduate School of Business, Universiti Sains Malaysia, Pulau Pinang, Malaysia Correspondence: Nabsiah Abdul Wahid, Graduate School of Business, Universiti Sains Malaysia, 11800 Pulau Pinang, Malaysia. Tel: 60-46-53-5161. E-mail: nabsiah@hotmail.com; nabsiah@usm.my Received: August 4, 2014 Accepted: September 22, 2014 Online Published: February 12, 2015 doi:10.5539/ass.v11n5p26 URL: http://dx.doi.org/10.5539/ass.v11n5p26 Abstract Since Malaysia’s most recent water reform exercise, the issue on whether Malaysian public (households) would be willing to pay for possible new water tariff in return for services provided for them has arisen. This study investigates whether taste, filtered water, color, water contamination, drinkable tap water, customer services, uninterrupted water supply and income determine Malaysian consumer’s willingness to pay (WTP) for their household water consumption. A survey was carried out on more than 262 representing households who are also paid domestic water customers. Multiple regression analyses results showed that only four from the eight factors examined were significant and acted as determinants to WTP. These are taste, uninterrupted water supply, water contamination and income. The study also found that majority of household consumers is only willing to pay for an increase of not more than RM5 from their current water bill. The findings provide an insight particularly for the government and water services providers in Malaysia on factors that they should consider when planning for any water tariff increase. Keywords: consumers, health risk, Malaysia, water quality, willingness to pay (WTP) 1. Introduction Acknowledging water as a scarce resource is why securing and providing safe drinking water for the public becomes top priority for governments around the world and Malaysia is not excluded. Amongst the many initiatives on safe drinking water provision that the country implements include the continuing five-year Malaysia Plans series to ensure the quality of life of its citizens is improved. Despite the efforts, the public still experiences water related problems like oil spillage, bacteria contamination in the rivers used for water intake and water disruption. In August 2013 for instance, oil spillage in Selangor River caused four water treatment plants in the Selangor state to temporary shut downs that led to a major water supply disruption for millions of household consumers and businesses (Au & Mokhtar, 2013). Another May 2014 incident not only pollutes the Batu Ferringhi River in Penang with sewage treatment plant discharges but also contaminates it with E. Coli (Ngui, 2014). These incidents amongst other factors not only affected the public’s perception about water services providers (mostly states) and water provided for their needs but also about whether they will be willing to pay (WTP) for the services they are provided with at an increased tariff. In the most recent water restructuring exercise, the issue on abolishment of government’s subsidies has been suggested. To date, the government has been shouldering some of the water delivery process costs incurred which is claimed to lead to inefficient water resources management by the services providers in the country. The government intended to adopt Full Cost Recovery (FCR) approach to enable for all of related costs to be recovered when water is delivered to customers as opposed to the cost-plus approach that are currently applied by water service providers in Malaysia. Subsidies dependent has in some way caused many states to operate inefficiently. With the new approach, it is hoped that the states as water services providers will be able to efficiently manage their water operation and cover any losses by closing the gap between actual costs that they incurred and water tariff or price that the public pays. This means that Malaysian public will be responsible to pay for the “efficient” cost of delivering water services that they consume (SPAN, 2008) rather than burdening the cost to the government which needs to be covered via subsidies. This also means that the possibility for water tariff to be increased by water services providers in the country will be most likely in the near future.